How pharmaceutical companies can keep up with the shifting trend towards reducing carbon emission beyond their direct organisational control.
Regulation, efficiency and reputation have encouraged many organisations to consider how they can measure and reduce carbon emissions in their own businesses. The agenda, however, is now shifting towards the wider carbon impact of the organisation. There is an increasing awareness that emissions outside the direct organisational control represent an opportunity to improve cost efficiencies and reduce emissions.
In the pharmaceutical sector, this could apply to the carbon embodied in a particular drug, how chemical waste is disposed by a supplier or the release of greenhouse gases contained in the propellant of an inhaler used by patients. This is important because the National Health Service (NHS), which represents approximately 25% of England's public sector emissions, estimates that 60% of the emissions can be allocated to procurement.
Pharmaceutical companies recognize that significant savings could be made in their indirect emissions and there is increasing pressure for them to demonstrate this to their customers. There are, however, certain challenges to overcome.
A new drug can take significant time and resources develop, from initial R&D through to approval by regulatory bodies. It is very difficult to then change the components, packaging and delivery model of pharmaceutical products because of expensive retesting and new regulatory approval. This contrasts with the retail sector where product specifications can change within days in response to a new low carbon innovation. The challenge for pharmaceutical companies, therefore, is to understand how to design the carbon, and associated cost, out of products during the initial R&D phase.
When a pharmaceutical company is granted a patent it is important that that product reaches the market quickly to meet the needs of patients, to recover the costs involved in the R&D phase and to maximize the patent lifetime. The urgency to bring the drug to market means that it may not necessarily be manufactured as efficiently as possible.
Relationship with Suppliers
Companies with fast moving consumer goods and high volume sales are more able to quickly use different raw materials and suppliers to reduce emissions. In contrast, this is more difficult for pharmaceutical companies because of the specific and complex chemical processes and more limited number of API suppliers. Collaboration with these suppliers, therefore, is more important if reductions are to be achieved across the supply chain.
Supply Chain Characteristics
The large number of chemical components that are frequently used to produce a drug introduces another challenge for pharmaceutical companies. The supply chain becomes more complicated at the start of the supply chain, which makes it more challenging to trace detailed information.
Drugs are packaged in accordance with regulations, and so may not use the most carbon‑efficient design. It can be challenging, therefore, to implement innovative designs that save carbon yet adhere to regulations.
With these challenges in mind, how can pharmaceutical companies respond?
The production of many drugs can be expensive and requires complicated chemical processes that generate significant amounts of waste. Optimizing the production process to increase yield and minimize waste will undoubtedly increase profits and save carbon.
Product Use Phase
GlaxoSmithKline revealed in its 2010 Sustainability Report that an estimated 40% of its overall carbon footprint comes from indirect emissions resulting from the use phase of its products, such as propellants in inhalers. This highlights that the use and disposal of pharmaceutical products can significantly affect emission reductions.
The industry is looking at more collaboration to source and refine raw materials. Although individually, pharmaceutical companies may procure a chemical ingredient at a lower volume than other industries, a collective approach to encourage suppliers to adopt less carbon‑intensive processes can affect change. Collaboration might also be an effective approach to tackle the regulatory red tape encountered when changing a product to a lower carbon design.
Working with the NHS
The UK NHS accounts for 4% of global pharmaceutical sales and a large proportion of UK investment. New technology and processes such as RFID tagging, use of two‑dimensional barcodes and new packaging techniques can help to optimize stock control, reduce wastage and improve logistics. These developments should also have a positive impact on the environmental footprint of healthcare and pharmaceutical products, as well as generating cost savings for the NHS,
The assessment of reducing carbon across a pharmaceutical value chain can be complex. It is important that the assessment meets the business aims of the company and adds value. Pharmaceutical companies should start evaluating this area now and seek expert guidance.
The unique business model and intrinsically innovative nature of the pharmaceutical industry mean that it is a particularly complex sector for measuring, managing and reducing carbon emissions. As expectations of customers increase, however, forward‑thinking pharmaceutical companies can genuinely differentiate their brand and products from the competition by reducing the carbon impact of their products.